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TMI Blog2019 (2) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... le to deduct tax at source on merchant discount/collection charges paid on account of credit card transactions. 2.0 Brief facts of the case are that the assessee is engaged in the business of running a hotel in the name of 'Taj Palace'. Proceedings u/s 201 of the Income Tax Act, 1961 (hereinafter called 'the Act') were initiated by way of notice u/s 201 r/w 201(1A) of the Act and the assessee was asked to furnish details of commission allowed to the various banks on credit card transactions during the year under consideration. It was the submission of the assessee that credit card commission was out of the realm of section 194H of the Act since there was no principal-agent relationship between the merchant establishment and the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realized service charges/ commission in lieu thereof M/s The Indian Hotels Company Limited and paid service tax on such services. 2. Whether on the facts and circumstances of the case the CIT (A) was justified in holding that there was no "Principal and Agent "relationship between M/s The Indian Hotels Company Limited and the Banks particularly when such Banks, after getting their credit card swapped on the machines installed at the premises of M/s The Indian Hotels Company Limited, are bound to make payments of sale consideration to M/s The Indian Hotels Company Limited and collect the same from Credit Card Holders on behalf of M/s The Indian Hotels Company Limited. 3. Whether on the facts and circumstances of the case the CIT (A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Mumbai Bench in assessee's sister concern in the case of ITO(TDS)(OSD) vs The Indian Hotels Company Ltd. in ITA No. 5419/Mumbai/2014 vide order dated 13.04.2016 for assessment year 2011-12. A copy of the said order was placed on record. The Ld. AR also placed reliance on another order of the ITAT Mumbai Bench in the case of assessee's sister concern for assessment year 2010-11 in ITO(TDS)(OSD) vs. M/s Indian Hotels Company Ltd. in ITA No. 2474/Mumbai/2014 wherein, vide order dated 23.06.2017, it has been held that there was no principal agent relationship between the bank and the assessee and that the assessee was not liable to deduct tax at source u/s 194H on discount/commission charges retained by the banks from the customers who had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Another reason why we feel Section 40(a)(ia) of the Act should not have been invoked in the present case is the principle of doubtful penalization which requires strict construction of penal provisions. The said principle applies not only to criminal statutes but also to provisions which create a deterrence and results in punitive penalty. Section 40(a)(ia) is a deterrent and a penal provision. It has the effect of penalising the assessee, who has failed to deduct tax at source and acts to the detriment of the assessee‟s property and other economic interests. It operates and inflicts hardship and deprivation, by disallowing expenditure actually incurred and treating it as disallowed. The Explanation, therefore, requires a strict const ..... X X X X Extracts X X X X X X X X Extracts X X X X
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